following between 0 and 1.) Expected Return Stock A B C 8.44% 10.12 12.22 for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. Standard Deviation Beta 16% 0.7 16 16 1.1 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) The data has been collected the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. What is the market risk premium (rM - Tar)? Round your answer to two decimal places. 96 b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. Would you expect the standard deviation of Fund P to be less than 16%, equal to 16%, or greater than 16% ?

following between 0 and 1.) Expected Return Stock A B C 8.44% 10.12 12.22 for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. Standard Deviation Beta 16% 0.7 16 16 1.1 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) The data has been collected the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. What is the market risk premium (rM - Tar)? Round your answer to two decimal places. 96 b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. Would you expect the standard deviation of Fund P to be less than 16%, equal to 16%, or greater than 16% ?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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blackrock fund has expected return of 10.5 standard deviation of 17.5%and beta of 0.8 nippon fund expected return of 12.5% , standard deviation of 21%and beta of 1.1. the two mutual fund have correlation coefficient of0.7.find the expected return and standard deviation of the market.what is the riskless rate of return
Below are standard deviations of four stocks: M, N, O and P. Stock M N O P Standard deviation 12% 20% 15% 30% 1. Which stock is the riskest? 2. Based on the risk-return tradeoff, which stock should provide the highest 3. If stock O provides a higher return than stock P, what should happen?
Use the following data to answer the question regarding the performance of Guardian Stock Fund and the market portfolio. The risk- free return during the sample period was 5%. Average return Standard deviation of returns Beta Residual standard deviation Guardian 14% 26% 1.2 (0.80) 4% X Answer is complete but not entirely correct. Information ratio Market Portfolio Calculate the information ratio measure of performance for Guardian Stock Fund. (Round your answer to 2 decimal places. Do not round intermediate calculations.) 10% 21% 1 0%
1. The following table presents the expected returns of three stocks and the risk free rate. в 4% Stock A 8% Expected return What is the expected return and risk on an equally weighted portfolio composed of these four assets? The standard deviation of stock A is 10% and the covariance between A and B equals 0.0045. The correlation matrix between A, B and C is: 14% 4% Correl B A 1 0.3 0.7 B 0.3 0.5 0.5 Combining stocks A and C in a portfolio in equal proportions will result in a variance of 1.95%. 0.7
Now it's time for you to practice what you've learned. Consider the following information for Stocks A, B, and C. The returns on the three stocks, while positively correlated, are not perfectly correlated. The risk-free rate is 3.50%. Stock Expected Return A B C 8.30% 10.70% 13.10% Standard Deviation Beta 1.2 20% 20% 20% The beta for Fund P is approximately 1.8 2.4 Let 7; be the expected return of stock i, TRP represent the risk-free rate, b represent the Beta of a stock, and TM represent the market return. Using SML equation, you can solve for the market risk premium which, in this case, equals approximately Consider Fund P, which has one third of its funds invested in each of stock A, B, and C. You have the market risk premium, the beta for Fund P, and the risk-free rate. Hint: Recall that because the market is in equilibrium, the required rate of return is equal to the expected rate of return for each stock. This information implies that the required rate of return for Fund P is…
K -61 =1 2 N (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common stocks. Given the information that follows, which investment is better, based on the risk (as measured by the standard deviation) and return? Probability 0.25 0.50 0.25 Common Stock A Probability 0.25 0.25 0.25 0.25 (Click on the icon in order to copy its contents into a spreadsheet.) @ 2 a. Given the information in the table, the expected rate of return for stock A is 16.25 %. (Round to two decimal places.) The standard deviation of stock A is %. (Round to two decimal places.) b. The expected rate of return for stock B is%. (Round to two decimal places.) The standard deviation for stock B is%. (Round to two decimal places.) c. Based on the risk (as measured by the standard deviation) and return of each stock, which investment is better? (Select the best choice below.) 30² F2 W OA. Stock A is better because it has a higher expected rate of return with less risk B. Stock B is…
The following are estimates for two stocks. Firm- Specific Expected Standard Stock Return Beta Deviation A 14% 0.90 30% B 21 1.40 42 The market index has a standard deviation of 20% and the risk-free rate is 7%. Required: a. What are the standard deviations of stocks A and B? b. Suppose that we were to construct a portfolio with proportions: Stock A Stock B T-bills 0.30 0.45 0.25 Compute the expected return, beta, nonsystematic standard deviation, and standard deviation of the portfolio.
Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta 16% 0.8 B 16 1.2 с 8.50 16 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 4.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) a. What is the market risk premium (re-ra)? Round your answer to one decimal place. b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. What would you expect the standard deviation of Fund P to be? 1. Less than 16% II. Greater than 16% III. Equal to 16% -Select- 6.50% 7.50
О SB Fund has run the Carhart multi-factor regression on the expected return of its portfolio A. Based on the following factor loadings what types of stocks is portfolio A most likely holding? Risk premium ВА ад Alpha Market SMB HML Momentum 8.0% 3.5% 4.0% 2.1% 0.9 1.7 -0.6 -0.5 1.2% a. small stocks, growth stocks, and stocks with poor past performance b. large stocks, growth stocks, and stocks with poor past performance C. small stocks, growth stocks, and stocks with good past performance d. large stocks, value stocks, and stocks with good past performance e. small stocks, value stocks, and stocks with poor past performance
An investor is setting up a fund which requires 18 years of contributions. The investor pays £200 per month for 15 years. After 15 years, the payments increase by £10 for the subsequent 3 years. All payments are made in arrears, i.e at the end of the period. The effective annual rate i = 2%. What is the value of the fund after 18 years? £ 数字 Enter an answer correct to 2 decimal places.
Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A B с 9.30% 10.35 12.10 14% 14 14 0.8 1.1 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 6.5%, and the market is in equilibrium. (That is, required returns equal expected returns.) a. What is the market risk premium (гM-TRF)? Round your answer to one decimal place. % b. What is the beta of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. c. What is the required return of Fund P? Do not round intermediate calculations. Round your answer to two decimal places. % d. What would you expect the standard deviation of Fund P to be? I. Less than 14% II. Greater than 14% III. Equal to 14% -Select-
Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom.13.02.32.50 Normal.55.10.22.20 Bust .32.16.21.35 If your portfolio is invested 40 percent each in A and B and 20 percent in C, what is the portfolio's expected return, the variance, and the standard deviation? Note: Do not round intermediate calculations. Round your variance answer to 5 decimal places, e.g., 16161. Enter your other answers as a percent rounded to 2 decimal places, e. g., 32.16. If the expected T-bill rate is 4.25 percent, what is the expected risk premium on the portfolio? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.

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